Due to the uncertainties in the conflict in Ukraine and the international sanctions on Russia, the global stock markets have been on a steady decline even in our country. Of course, even if we are so far away and hardly do any business with Russia and Ukraine, we are still adversely affected. The most obvious sign is the increasing price of our gasoline and diesel, as well as the tremendous decline in the Philippine stock market.
I am sure you have all heard that the best time to buy is when there is “blood on the streets”. Considering that the equities markets have been on a decline for several weeks now, you must have nerves of steel not to be at least a little bit worried about your investments. It is one thing to just let whatever you have go along this roller coaster ride, it is something else when you actually ante up.
From my experience, something bad really happens in the equities market every decade or so and each time it scares the hell out of me and regret not getting out of the market at the high before the collapse. A year or two later, I regret not having the balls to put in more money when the prices were really down! Such misery being caught in a downturn and so much regret when the market recovers.
There is only one thing that will prevent a recovery and further gains in the market, the end of the world. While it is a remote event, it can happen when an asteroid hits the Earth or when there is a nuclear war. However, if that happens, it really does not matter if you got your money out before the collapse, stayed the course or put more money in. No one will be around to keep score. So it is actually useless to lose sleep over your investment in this scenario. You would have bigger problems to worry about.
Taking a more pragmatic approach, this time I will not only let my investment ride but put in more money. I have thought it through and it seems like there could be companies out there that will do very well in a prolonged difficult situation. In the PSE alone there are a number of companies that supply coal, minerals and other essential goods or services that have increased in value.
Take a look at their cash dividend history which may seem to provide a modest return of say 5% under normal circumstances. However, a number of things have changed with the new world order. Their share price has dropped but the prices of their products have increased in multiples. This means that it is logical to assume these listed companies will earn more money and therefore be able to declare more cash dividends. With their share prices on a decline, now is the time to buy since your dividend yield will certainly increase. There are now a number of these companies that at the current price and their historical cash dividend, will now provide yield in excess of 10%.
Once the increase in the price of their products are fully factored in, the stock price will catch up and provide you not only with a nice dividend yield but also a huge capital gain. If I kept my money in the bank as a deposit I would be lucky to get a return of 1%, which does not even cover inflation. There is blood on the streets and it is about time we learn from history…
(The views and comments of the author are his own and not of the newspaper or FINEX. Comments may be sent to [email protected])